Tag Archives: Dean Baker

Paulson’s Pinata: Wall Street waits for the candy to drop

Piñata: a decorated vessel (as of papier-mâché) filled with candies, fruits, and gifts and hung up to be broken with sticks by blindfolded persons. When it breaks and the goodies fall out, everyone scrambles to scoop up as much as they can.

Bob Herbert calls for a second opinion before we turn the keys to the kingdom back over to the thieves who stole the gold in the first place.

The sky was falling, [Paulson] seemed to be saying, and if the taxpayers didn’t pony up $700 billion in the next few days, all would be lost. No time to look at the fine print. Hurry, hurry, said the treasury secretary. His eyes, as he hopped from one network camera to another, said, as salesmen have been saying since the dawn of time: “Trust me.”

With all due respect to Mr. Paulson, who is widely regarded as a smart and fine man, we need to slow this process down. We got into this mess by handing out mortgages like lollipops to people who paid too little attention to the fine print, who in many cases didn’t understand it or didn’t care about it.

-snip –

I agree with the economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, that while the government needs to move with dispatch, there is also a need to make sure that taxpayers’ money is used only where “absolutely necessary.”

Lobbyists, bankers and Wall Street types are already hopping up and down like over-excited children, ready to burst into the government’s $700 billion piñata. This widespread eagerness is itself an indication that there is something too sweet about the Paulson plan.

Yup. “Fool me once, fool me….”

Pandemonium: Wall Street loses its panache

Pandemonium: wild uproar and noise, from Greek pan=all, daimon=demon, in other words, all hell breaking loose.

Panache: A plume of feathers, especially on a helmet; dash, swagger, verve.

Wall Street’s mighty firms have fallen like the houses of cards they were.  That perky plume looks more like the soggy victim of an oil spill. The bloom is off the rose, the balloon has popped, and the souffle has collapsed.  Greed apparently has no limits and, in the financial orgy that accompanied the deregulation of the financial markets, nobody thought it could end.  Like a cancer that consumes its host – it forgets that when the host is used up they will both die.

So now the demons are loose and we, the little people, may get sold down the river again as the Bush administration considers bailing out these titans with OUR taxpayer dollars.

As Dean Baker, who wrote The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer said:

They leveraged themselves to the hilt. The investment banks, like Lehman and Bear Stearns, leveraged themselves to a ratio of thirty-to-one. In other words, if they had $10 billion in capital, they had loans on the order of $300 billion. I mean, this was just asking for disaster.

And … it did collapse. It was totally predictable it would collapse.  I didn’t know when, didn’t know exactly who, but it was totally predictable. And now they’re running to us and asking us for handouts. Think of what we do to welfare people, when they have to go through to get a $500-a-month check, and these people want billions, no questions asked. Unbelievable.

The bailout being proposed is itself a totally predictable scheme. The blogger devilstower wrote a brilliant essay yesterday on DailyKos describing the history of the mess we find ourselves in, and concluding that we’ve been had, AGAIN:

When taxpayers are left holding the bag for $1 trillion this time around, it’s hard to believe it’s any sort of accident. This is enemy action. This is a bullet deliberately fired into the economy by men willing to exercise their ideology regardless of the cost to taxpayers. Men who have every expectation that they can plunder the system again and again, while the public picks up the tab.

My ex is one of the victims of the real estate version of the mess on the west coast. He invested in an assisted living center in Colorado through an investment partnership called SunWest Management. The property is now being foreclosed on and he stands to lose his entire investment.  The company is being sued for unlawful business practices, false advertising and consumer act violations in several states, and they’re teetering on the edge of bankruptcy, threatening upheaval for thousands of senior citizens and potentially leaving company investors empty-handed.

Sunwest Management Inc. is (was?) the nation’s fourth-largest assisted living company, with 275 properties in 36 states and estimated annual revenue of $600 million. The company employs 12,000. They grew like crazy during the last few years, leveraging off their own leveraged mortages.

And it was a deck of cards.